5 Tips to Help You Get Out of Debt Faster and Live Debt Free
The average American carries more than $92,000 of debt. This debt will likely follow them for decades, if not their entire lives.
Unfortunately, it’s almost impossible to avoid accruing debt in modern society. Unless they’re independently wealthy, most people need to take out loans to pay for things like college, homes, cars, and more.
However, the extent and duration of your debt depend on the decisions you make. It’s possible to live debt-free, no matter what your financial situation looks like right now.
We’re going to help you get there. Keep reading for a quick guide on how to get out of debt fast.
1. Understand Your Spending Habits
First, in order to remediate a problem, you must understand the root of the problem. In this case, you need to understand why you’re having money problems. While it’s easy to say “I don’t make enough money,” there are likely other problems contributing to your financial woes.
Most people don’t truly know their spending habits, they just know they don’t have much money left over at the end of each month. Did you know that 63% of Americans live paycheck to paycheck?
However, it doesn’t have to be this way. Odds are, you’re spending way more money than you think on things like dining out, impulse shopping, and groceries.
Dig deep into your finances for the last three months, paying attention to your checking account and any credit card accounts. Create a spreadsheet and outline exactly how much money you spend and how you spend it. You will probably be surprised by what you find.
2. Reduce Your Monthly Expenses
Once you see how you’re spending your money, you’ll have a pretty good idea about where you can start cutting back. To get out of debt and live debt-free will take sacrifice. Though this doesn’t mean you need to live uncomfortably, it does mean forgoing certain luxuries.
Here are some suggestions on how to reduce your monthly expenses so you can pay back debts faster:
- Limit eating out or ordering in from restaurants
- Prepare all of your meals at home (including lunches for work)
- Cancel unused or unnecessary subscriptions and memberships (gyms, subscription boxes, etc.)
- Limit yourself to only one TV/movie streaming service
- Make a grocery list (and stick to it) based on what you need for the week’s meals
- Stop shopping online
- Don’t buy coffee shop coffees, brew coffee at home
There are several other budgeting tips and tricks you can follow to save even more money. However, if you’re looking for some extreme solutions to significantly lower your bills, consider downsizing your home and downgrading your car. These two steps alone can save you hundreds of dollars a month.
3. Find Ways to Make More Money
If you’re already living a relatively minimalistic life and still don’t have much money left over to put toward debt, the solution is to increase your income. At this point, you’re probably thinking “If making more money was easy, everyone would do it.”
Well, it is easy, but not everyone has the motivation to put in the extra effort. There are countless ways to make extra money with limited/no experience. Here are some simple suggestions to increase your income so you can live debt-free:
- Drive for Uber, Lyft, or DoorDash on the weekends and/or in the evenings
- Rent out your car on the weekend (or a spare car full-time)
- Rent out the extra room in your house or apratment
- Rent out storage space in your house or garage
- Donate plasma every week
- Do yard work for neighbors
- Clean houses on your days off
- Find an online gig (writing, content creation, managing social media profiles, etc.)
- Fill out paid surveys
There are thousands of opportunities available to you, you just need to put yourself out there and be willing to do the work. Any of the options listed above can put hundreds of dollars in your pocket every month for only a few extra hours of work each week.
4. Put Yourself on a Budget
To get out of debt, stay out of debt, and live debt-free, you need to put yourself on a budget. If you follow the steps listed above, this part should be relatively easy.
With an intimate understanding of your monthly expenses. Figure out exactly how much you need to pay for your monthly obligations:
- Debt payments
- Recurring bills (utilities, services, insurance, etc.)
- Living essentials (groceries, gas, etc.)
However, we also recommend setting aside a monthly amount to prepare for your future. If your job offers it, we recommend paying into a 401k or similar retirement plan. Otherwise, consider investing in a Roth IRA on your own.
Finally, you need money in savings. First, establish a minimum emergency fund of $1,000. Then, put a percentage of your earnings into savings each month, but make paying off your debt the top priority.
5. Implement a Debt Payoff Strategy
Learning how to get out of debt fast means implementing a tried and true strategy. We recommend the Debt Snowball Method. This is a relatively simple plan you can implement today, even if you only have $50 left at the end of each month.
Here is the basic outline:
- Put all remaining funds each month into your smallest debt
- Continue making the minimum payments on your other debts
- Once the first debt is paid off, put all remaining funds into your next smallest debt
- Continue the process until you are debt-free
This strategy is effective because each time you pay off a debt, your “debt snowball” grows. You can use the payment that was going towards the debt plus your extra funds to put into the next debt. Eventually, you’ll be able to put hundreds of dollars into large debts every month.
Do You Want to Live Debt-Free?
Are you ready to start implementing a plan to live debt-free? We have more help to offer. Check out some of our other articles to find more tips for debtors, saving advice, and information on how to repay your debt.
And if you’re in a bind and need money to get a foothold on your debts, apply now for a personal loan. We offer amazing rates and can help you get the money you need sooner, rather than later.